SYDNEY: The Australian and New Zealand dollars were on a steadier footing on Monday after Treasuries rallied on a benign reading on US inflation, although the technical outlook still looked bearish for the two.
The Aussie was little changed at $0.6253, having risen 0.2% on Friday to pull away from a two-year low of $0.6199.
The next major bear target is a trough from October 2022 at $0.6170, while it needs to recover $0.6350 to break the downward trend. It is set to end the year 8.3% lower, the worst since 2018.
The kiwi dollar was flat at $0.5653, after gaining 0.5% on Friday to as high as $0.5672. Support lies at a two-year low of $0.5608, with resistance up at $0.5750.
It is down 10.5% for the year, the worst since 2015. On Friday, the closely watched US inflation gauge - the core Personal Consumption Expenditures Price Index - came in at a monthly rise of 0.1% in November, below forecasts.
Treasuries yields fell and the dollar pulled back from two-year highs. As 2024 draws to an end, liquidity is thin.
“The markets are likely to trade sluggishly going into the holiday season; liquidity, as is typical during this period, may be thin, with markets prone to unexpected bumps and air pockets,” said Kyle Rodda, a senior analyst at Capital.com Down Under, the Reserve Bank of Australia will release the minutes of its December policy meeting on Tuesday, the last remaining item on the calender for the year.
Australia, NZ dollars hit 2-year lows as Fed signals rate pause ahead
The RBA earlier this month held policy steady but unexpectedly opened the door to a rate cut next year.
Swaps imply a 70% chance for a move in February, while the first rate cut is fully priced in for April next year. Local bonds tracked the rally in Treasuries.
Three-year Australian government bond yields fell 6 basis points to 3.926%.
Across the Tasman sea, the surprisingly weak economy has had investors fully expecting a 50 basis point rate cut from the Reserve Bank of New Zealand in February.
Two-year swap rates fell 10 bps to 3.3725%, the lowest since early 2022.